Income Taxes

33. Income Taxes

The tax expense consists of corporation and trade tax of domestic companies and comparable income taxes for foreign companies.

The taxation applies regardless of whether the income is reinvested or distributed. The implementation of the proposed distribution of net retained profits has no effect on the tax expense of the Group.

In accordance with IAS 12, deferred taxes are determined using the liability method. Under this method, deferred taxes are recognized for all accounting and measurement differences between the IFRS carrying amounts and the tax base if they balance each other out over time (temporary differences). If asset items under IFRSs have a higher value than in the tax base and these are temporary differences, a liability item is recognized for deferred taxes.

Deferred tax assets from accounting differences and benefits from the future utilization of tax loss carryforwards are capitalized if it is probable that future taxable earnings will be generated.

The tax rates valid at the time of realization of the asset or the settlement of the liability are used to calculate deferred tax assets and liabilities. These are measured using the tax rates of the individual Group companies. For domestic partnerships these comprise only trade tax and vary between 13.3 percent and 16.1 percent because of different assessment rates.

For domestic corporations a tax rate of 31.9 percent (previous year: 31.9 percent) was applied, comprising the corporation tax rate plus the solidarity surcharge and the trade tax rate for the main consolidated companies. The income tax rates for foreign Group companies ranged between 19.0 percent and 28.0 percent (previous year: between 15.0 percent and 28.0 percent).

Key components of income tax expense break down as follows:

Deferred taxes result from temporary differences between the tax bases of the companies and the carrying amounts in the consolidated statement of financial position using the liability method, as well as from the loss allowances for deferred taxes on temporary differences and loss carryforwards capitalized in prior periods, from the use of loss carryforwards on which deferred taxes had been capitalized, from the elimination of loss carryforwards and from the recognition of deferred taxes on interest expense carryforwards.

Deferred income taxes

The deferred tax items reported as of the ends of the various reporting periods and the movements of deferred taxes within the reporting year relate to the items presented in the table.

EUR 4,538 thousand (previous year: EUR 8,244 thousand) of the deferred taxes was classified as current and EUR 526 thousand (previous year: EUR –6,106 thousand) as non-current. Of the changes in equity, EUR –280 thousand (previous year: EUR –734 thousand) was offset against other reserves and EUR 451 thousand (previous year: EUR –392 thousand) recognized in retained earnings.

Deferred tax assets

The recognition and measurement of other assets in the amount of EUR 51,667 thousand (previous year: EUR 52,490 thousand) principally related to the following line items:

• Loans to affiliated companies
• Trade receivables
• Other assets
• Trade payables
• Other current financial liabilities

The recognition and measurement of other liabilities in the amount of EUR 2,936 thousand (previous year: EUR 2,315 thousand) principally related to the following line items:

• Other non-current liabilities
• Government grants (current and non-current)

Deferred tax liabilities

The recognition and measurement of other assets in the amount of EUR –6,590 thousand (previous year: EUR –5,972 thousand) principally related to the following line items:

• Current finance receivables
• Receivables from affiliated companies
• Trade receivables

The recognition and measurement of other liabilities in the amount of EUR –28,238 thousand (previous year: EUR –28,919 thousand) principally related to the following line items:

• Non-current loans
• Current portion of non-current loans
• Other current liabilities

The following deferred tax assets were not capitalized:

The assessment of the recoverability of deferred tax assets depends on the estimation of the probability of the reversal of the measurement differences and the availability for use of the loss and interest expense carryforwards which resulted in deferred tax assets. This is dependent upon the generation of future taxable earnings during the periods in which those tax measurement differences are reversed and tax loss and interest expense carryforwards are available for use. The basis of the measurement is the five-year medium-term planning of the individual Group companies.

For subsidiaries that have suffered losses during the reporting year or the prior period, deferred tax assets of EUR 0 thousand (previous year: EUR 0 thousand) were reported due to the improved earnings outlook.

As of December 31, 2022, the Group had tax loss carryforwards of EUR 324,998 thousand (previous year: EUR 296,140 thousand). As of December 31, 2022, no deferred tax assets were capitalized for tax loss carryforwards of EUR 324,998 thousand (previous year: EUR 295,706 thousand) of various subsidiaries. No deferred tax assets were recognized for these losses since these losses may not be used to offset taxable earnings of other Group companies and arose in subsidiaries that have generated tax losses for some time or will not generate sufficient taxable profits in the foreseeable future.

The deductible differences for which no deferred taxes were capitalized as of December 31, 2022, and December 31, 2021, related to subsidiaries whose expected taxable income situation is not expected to allow the use of deferred tax assets.

Interest expense carryforwards of the Group amounted to EUR 30,649 thousand as of December 31, 2022 (previous year: EUR 0 thousand). No deferred tax assets were recognized for EUR 12,337 thousand (previous year: EUR 0 thousand) of this amount, as the respective Group companies are not expected to generate the EBITDA required for this purpose in the next five years.

Reconciliation of the effective tax rate and the effective income tax expense:

34. Income Taxes on Income and Expense Recognized Directly in Equity

35. Reimbursement Rights from Income Taxes

The tax assets related to reimbursement rights for the reporting year of EUR 753 thousand (previous year: EUR 1,169 thousand) as well as reimbursement rights for prior periods of EUR 3,027 thousand (previous year: EUR 1,675 thousand).

Please refer to 33 for information on rights arising from deferred taxes.

36. Payment Obligations from Income Taxes

Please refer to 33 for information on rights arising from deferred taxes.